Liability of https://t.co/6CNW7kgfII-Card Holders =RBT. What country treats its immigrants better than its citizens? https://t.co/2UmKT55ELn
— Patricia Moon (@nobledreamer16) May 12, 2016
Introduction (my own, not the author of the post, John Richardson).
What country treats its own citizens worse than it treats its immigrants?
Phil Hodgen’s Expatriation Letter of the Week is based upon this concept: whether tax liability of a green-card holder depends upon residency only or whether it includes other factors to consider in order to protect oneself from the long and complicated arms of IRS regulations. The example is simple and offers no less than 5 possible ways to deal with ending a non long-term status as a permanent resident of the United States. It is astounding that so much can be involved for a residence of 3 months with no income earned (US source or otherwise). Only in the USA could things be this complicated and full of possible issues (audits, penalties, etc).
Someone who is a nonresident will only be required to file a U.S. tax return because of:
- receiving income from U.S. sources; or
- being engaged in business in the United States, even if zero income is derived from it
Without unusual complicating factors, the general idea that one owes the US any tax is based upon either being a resident, or if a non-resident, having US-sourced income. What is interesting is that if one is a non-resident US citizen, none of the possibiities that apply to immigrants to the US are available to citizens. Phil’s letter is a demonstration of the extent of possibilities available to some but denied to other non-residents based only upon their place of birth.
This post, in addition to Physical presence as a necessary condition for being a US “resident” under the Internal Revenue Code , emphasizes the importance of physical presence as a condition of liabiity for U.S. taxation. Phil’s letter speaks to the (ridiculous) lengths the IRS will go to avoid taxing anyone who can prove they are a non-resident alien. This speaks to the level of residence-based taxation that is in reality, practiced by the U.S. and which shows the U.S. to be basically like any other country. If we want to get rid of CBT, we need to build arguments to point to practical issues as well as Constitutional ones. At present, to my mind, it makes a lot of sense to build the arguments based upon practicality. This removes the “pay-one’s-share” issue in a non-confrontational way. To immediately hit the “patriotic” “you-owe-us-everything-for-the-privilege-of-your-U.S.-birth” types with “CBT-is-a-violation-of-our-human-rights” is to close a door before it is even opened. We can see that readily from the inability of almost everyone to discern the difference between non-resident “foreign” accounts held for legitimate purposes versus those held by resident Homelanders for purposes of tax evasion.
Please take the time to consider these points and start building them into your comments to online articles, letters to representatives etc. This is an arrow they won’t see coming.
Tax jurisdiction and residential ties
The two types of residential ties considered for all aliens
When considering the meaning of “residence” for tax purposes, attempting to ascribe a place of “residence “to an individual, and imposing taxation on individuals, the Internal Revenue Code considers:
A. The extent of “residential ties” to the United States; and
B. The extent of “residential ties” to another country.
We see both aspects of residence considered as a way to defeat the “substantial presence” test in Internal Revenue Code S. 7701(b). If the country of residence is uncertain, or if a person is considered to be a “tax resident” of the United States and another country, the Internal Revenue Code considers ties to both the United States and the other country in question.
For “resident aliens” (Green Card Holders):
– both past and present residential ties to the United States and to other nations are considered in at least 3 ways under the Internal Revenue Code itself; and
– residential ties to both the United States and the other country of residence are considered in determining residence under Article IV of the Canada U.S. (and other) tax treaties**.
Green Card Holders and tax residence
previous post discussed the fact that:
- Internal Revenue Code S. 7701(a)(30) defines “U.S. Persons”
as including “citizens” and “residents”
- The combined effect of Internal Revenue Code S. 7701(b)(1)
and S. 7701(b)(6) define Green Card Holders in a way that
ensures that they meet the statutory test of “residence”. (Of
course Green Card Holders may be able to defeat the status of
“resident” by making use of the Treaty Election in Article IV of
the Tax Treaty)
- The statutory defenses to “residence” found in S. 7701(b) of
the Internal Revenue Code, available to “aliens” who are NOT
Green Card Holders, take into account and are a function of the
extent of residential ties to other jurisdictions
Residence matters and residence matters hugely. Hence, the definition of “resident” matters and matters hugely.
Please see more here
This is all way above my head! None of it makes sense anymore to me. A european friend of mine has a condo in Florida and she has this mathematical formula of how many days she can stay without being taxable in America- something to do with so many days from the year before which are added on to the days of this year etc- and even that calculation is over my head. Why make things soooo complicated? Is that so one can possibly make costly mistakes?
The US tax code is so complicated that I could never figure it out on my own either. How many pages is it? Thousands? WHY?
@Polly, I reckon the tax compliance industry has lobbied Congress to keep it complicated!! >:(
They have lobbied in so many loopholes that the tax code gets longer and longer. And what about those laws that make something like the Panama Papers and Delaware possible? I think one should start by holding these people to justice and not only those who used these corrupt laws. Prosecute those who are making all these loopholes! And make the tax code simpler and more efficient.
@Polly, it’s the main reason why I renounced.
I have lived in Europe since I was 10 years old with no intention of ever going back, so it was a no brainer to renounce. But when one imagines risking ruinous penalties for one tiny mistake while not comprehending the labyrinth of rules and this every year for the rest of your life – that is a no brainer too.
“Someone who is a nonresident [*] will only be required to file a U.S. tax return because of:
•receiving income from U.S. sources; or
•being engaged in business in the United States, even if zero income is derived from it”
[*] needs to say nonresident ALIEN.
“Phil’s letter speaks to the (ridiculous) lengths the IRS will go to avoid taxing anyone who can prove they are a non-resident alien.”
That needs to say the (ridiculous) lengths the IRS will go to avoid CBTing, formicating, and penalizing anyone who can prove that they are a non-resident alien.
As a non-resident alien my annual US taxes now are higher than all except two of the years that I was a non-resident US citizen. SBT (source based taxation) applies as in most of the world. Taxes withheld at the source are now the correct amounts of taxes, they are no longer refundable by filing a US return, and I don’t need to file a US return.
Most company employees in Japan don’t have to file Japanese returns. I have to because my employer doesn’t calculate year-end adjustments and I think there’s one more reason too. It’s not fun to figure out instructions for Japanese tax returns, but it sure is nice to get one finished in 3 days instead of 3 months. Also the National Tax Agency doesn’t penalize me for telling the truth on tax returns.
More on “Also the National Tax Agency doesn’t penalize me for telling the truth on tax returns.”
One time the former Revenue Canada sent an auditor to my apartment. She saw that I had declared everything correctly and that was the end of it.
One time Japan’s National Tax Agency sent an auditor to my then-employer, to audit me not the employer. They had suddenly discovered that something I declared on a return was true (when my previous-to-then-employer had falsified some reports). Auditing confirmed their surprising discovery that I had indeed declared the truth. They said they would investigate the previous three years as well, and there would be an effect on tax. Well that’s what they said, but that was the end of it. I never saw an effect on tax.
After I learned the reason why the IRS has been attacking me for the past 13 years, I tried to compel the IRS to audit me. But the IRS refuses and courts refuse. Honesty really is illegal on US returns. And the IRS still has something to hide. TIGTA has revealed enough now to show that Monica Hernandez wasn’t working alone, but they haven’t caught the ringleaders yet, gee I wonder why.
@Polly and @NormanDiamond, another reason why I chose to expatriate was because of the US Govt’s indifference to our suffering.
“The US tax code is so complicated that I could never figure it out on my own either.”
No s*hit. The US tax code is so complicated that the IRS, US Department of Justice, and courts can’t figure it out either.
have read that one of the most persistent lobby groups in the U.S. is the company Intuit, who makes Quickbooks, Turbo Tax etc.
I am sorry but the tax compliance industry is simply not our friend.
I live in Singapore and can read Chinese. I was reading the Singapore Chinese 联合早报 today.
There was an article about Deng Xiaoping’s grandson, Deng Zhuodi. Deng Xiaoping is the 2nd most important Chinese in modern history, after Mao Zedong.
Now, Deng Zhuodi is a rising star in the Communist Party, and is an official in the province of Guangxi, west of Hong Kong. As far as I know, he’s a nice guy.
But, Deng Zhuodi has a dirty, dirty, dirty secret.
He was born in America. Oh, my God. Worse than Adolph Eichman.
The Singapore newspaper article says that “he didn’t get a US passport”.
Did he renounce and relinquish his US citizenship?
Jesus, fucking Christ.
I am wondering whether the reprobate Deng Zhuodi renounced and relinquished US citizenship.
If he did not, did this scumbag file his FBAR on the Fincen website? Did he file his form 8938? Did he have any PFIC’s? Does he have an undeclared Chinese retirement saving plan? Did he declare his interests in Chinese stock market trading accounts?
If this reprobate isn’t in full compliance with his obligations to the United States Internal Revenue Service (fucking GOD GOD GOD), then the US Navy should go into the port of Beihai, in Guangxi province, near where this potential criminal lives, apprehend him and drag him back to America. He will then face the full force of American justice, amen.
I guess when he became a member of the Chinese communist party he could claim that he relinquished his US citizenship. As long as he didn’t do anything American since then.
Hence them stating that he didn’t get a US passport. This is something Boris Johnson could have done, unfortunately he went and renewed his passport.
I`d think Granddaddy offers some kind of protection. You dont mess with China.
But I guess he would qualify relinquishment as he has performed a relinquishing act…
But who knows his ‘compliance’ history pre reliquishment, but that would be of no consequence to the Chinese.
Eric, an IBS contributor, wrote a fine piece on Deng’s grandson’s US citizenship in 2013, which is at this link:
Be assured that the IRS and FinCEN will never, ever go after Deng’s grandson, as noted by Eric sarcastically in his concluding comments:
“Since I’m sure the IRS would never hold back from going after a U.S. citizen merely on the basis of who his grandfather was or the hilariously godawful mess it would cause in international relations.”
“I guess when he became a member of the Chinese communist party he could claim that he relinquished his US citizenship.”
Is party membership enough? Doesn’t he have to be a ranking official in government and not just in party?
Also, did he pay US$2,350 for a CLN? If not, he’s still a US taxcitizen, right?
Did he become a government official and renounce before age 18? If not, he registered for the draft, right When the US drafts him, he can fight for both sides.